Morgan Stanley: Fiscal Easing Will Not Raise Inflation

Morgan Stanley is backing moderate fiscal easing to drive growth in developed markets, saying they are in no danger of overheating. But timing and size of the fiscal easing might be key to containing potential inflation, the bank’s economists said in the Global Macro Briefing newsletter last week.

“…experience from previous cycles suggests that the timing and duration of fiscal policy are important factors. If stimulus turned out to be larger and came later in the cycle compared to what we currently anticipate, inflationary risks would certainly be tilted to the upside,” the team of Chetan Ahya, Jonathan Ashworth and Nora Wasserman wrote.

Still, Morgan has a caveat on its stance....